China has become an electric vehicle powerhouse. His car manufacturer BYD recently crowned Tesla in global sales of electric vehicles, with Elon Musk warning Chinese automakers say, “If there are no trade barriers, they will all but destroy most other automakers in the world.” They are extremely good.”
On Friday, the Alliance for American Manufacturing sounded the alarm and released a report titled: “On a collision course: China’s existential threat to the American auto industry and its path through Mexico.”
The report, which outlines policy recommendations to combat overcapacity and unfair trade practices, notes that BYD is building factories in Thailand and Hungary to serve as regional export hubs. Then it adds:
“More concerning, however, is the heavy spending by Chinese companies on facilities in Mexico, through which they can access the United States through more favorable tariffs under the United States-Mexico-Canada Agreement (USMCA). This strategy is essentially an attempt to gain backdoor access to American consumers by circumventing existing policies that keep Chinese cars out of the U.S. market.”
In the US, Chinese-made electric vehicles are currently subject to a 25% tariff, which is in addition to a 2.5% tariff on imported cars. This has prevented them from making significant progress. However, manufacturing in Mexico could be possible Change the equation.
A “coming wave” of Chinese electric vehicles
House lawmakers recently warned about it China's “industrial strategy to dominate the global auto market” and its electric vehicle manufacturers “are creating a backdoor into the US market through our key trading partners.” They called for maintaining or even increasing existing tariffs on Chinese-made cars, and described a “coming wave” of Chinese vehicles that “will be exported by our other trading partners such as Mexico.”
The Financial Times recently reported that Chinese car manufacturers such as MG, BYD and Chery have been looking for production sites in Mexico. Chinese cars are now being imported into Mexico have increased.
While Musk Credits While Chinese electric vehicle manufacturers are “extremely good,” the Alliance for American Manufacturing focuses more on the government support they receive, writing:
“With strong government support, Chinese automakers and suppliers have become industrial powerhouses, controlling the production nodes for virtually the entire electric vehicle value chain.”
BYD, backed by Warren Buffett Berkshire HathawayOne way it keeps its costs low is by owning the entire supply chain of its electric vehicle batteries – which is important since a battery accounts for about 40% of the price of an electric vehicle.
“Nobody can compete with BYD on price. Period,” said Michael Dunne, CEO of Asia-focused auto consultancy Dunne Insights, recently told The Financial Times. “Boardrooms in America, Europe, Korea and Japan are in shock.”
Ford CEO Jim Farley recently said he would confront the Chinese threat open to collaboration with competitors for battery production. His GM colleague Mary Barra made similar comments.
According to the Alliance for American Manufacturing, this threat is scarier than many people realize. It writes:
“The introduction of cheap Chinese cars – so cheap because they come with the power and funding of the Chinese government – into the American market could be a doomsday event for the U.S. auto sector.”